economic sophisms

Obamacare's True Beneficiaries Identified by Bastiat in 1845

In Frederic Bastiat’s “Economic Sophisms,” he begins by quoting the English philosopher, Jeremy Bentham:

“In political economy there is much to learn and little to do.”

Bastiat thought this so important that he begins his powerful book with this quote, one which at once acknowledges the natural power and tendency of free markets to benefit everyone, while simultaneously discounting the ability of the legislator to achieve little but mischief.

Almost all legislative efforts, all protests to what I am about to write notwithstanding, are geared toward the benefit of the producers in a respective industry, not the consumers of any individual product or service.  Bastiat, with piercing and brutal logic, demonstrates  that the interests of  the producer and those of the consumer to be completely and absolutely opposed.  The producer benefits from scarcity of his product, as this brings him a higher price, while the consumer benefits from an abundance of the same product, this absence of scarcity manifesting as a lower price.  

Any consideration of law or policy, must therefore, consider the effect it will have on both the consumers and the producers,  or the economic analysis is at best absurd, at worst duplicitous.  Expanding Bastiat’s analysis, then, any law or policy the result of which brings higher prices to an industry, whether intended or not, demonstrates without further proof or theorem needed, that the producer was the beneficiary.

If you think that this applies to Obamacare, you get a gold star.  No further proof is required that the producer (hospitals, insurance companies, etc) is the beneficiary of this law, other than the fact that the price of healthcare and health insurance has gone up.  Furthermore, as mentioned above, that the interests of the producer and consumer are diametrically opposed, to the extent that the producer is benefitted, the consumer is impoverished. When the market is allowed to function, these opposed interests arrive at a mutually beneficial space.  When the “state” makes its entrance, usually due to the bidding of the producers, the consumer is robbed of some of his marketplace influence and power.

Ever wonder why as an individual you can contribute to a 401K with pre-tax dollars but can not buy health insurance with pre-tax dollars?  If you guessed that:

1)this is a way to make you buy more of what Wall Street has to offer than you normally would and you also guessed

2)that the insurance companies benefit from selling one policy covering 1000 group lives, rather than 1000 individual policies, grab another gold star.

In both instances above, the tax law is twisted in favor of the producer, not the consumer.  In addition, having priced their insurance product beyond what freely acting consumers consider reasonable with record numbers of “uninsured,” the government has responded with Obamacare, a law which makes everyone buy an insurance product they wouldn’t buy on their own.  

Corporate hospitals didn’t support Obamacare because it would help the poor and uninsured.  They supported it because they would have guaranteed payment for every person who came through their doors, direct payment from the taxpayers in many cases, with no need to deal with reluctant paying or unsatisfied patients.  How’s that for a business plan, where you get paid whether the customer wants your product or not (insurance) and whether the patient is satisfied with their service or not (hospitals)?

Any legislation that rewards producers does so at the direct expense of consumers.  This is a game that has gone on as long as politics and the “state” have existed, a game that must be accompanied by a propaganda campaign meant to convince its victims are its beneficiaries.  As I have said before, nothing oozes out of Washington that doesn’t benefit those who wrote or promoted it.  The last thing on the mind of these central planners, was greater accessibility, lower prices and higher quality.  Re-reading Bastiat's  brilliant and timeless analysis helps make this even more clear to me.  

G. Keith Smith, M.D.

Ambitious men are often actuated by sinister and wicked attentions; their design, for example, may be to implant in the public mind the germ of international hatred. This fatal germ may develop itself, light up a general conflagration, arrest civilization, cause torrents of bloodshed, and bring upon the country the most terrible of scourges, invasion. At any rate, and part from other nations, and force Frenchmen who retain any sense of justice to blush for their country. These are undoubtedly most serious evils; and to guard the public against underhand practices of those who expose the country to such hazard, it is only necessary to see clearly into their designs. How do they manage to conceal them? By the use of metaphors. They twist, distort, and pervert the meaning of three or four words, and the thing is done.
—  Frédéric Bastiat, Economic Sophisms: Metaphors, p. 115

The robber, for the reason that he acts alone, has public opinion against him. He terrifies all who are about him. Yet, if he companions, he plumes himself before them on his exploits, and here we may begin to notice the power of public opinion, for approbation of his band serves to obliterate all consciousness of his turpitude, and even to make him proud of it. The warrior lives in a different atmosphere. The public opinion which would rebuke him is among the vanquished. He does not feel his influence. But the opinion of those by whom he is surrounded approves his acts and sustains him. He and his comrades are vividly conscious of the common interest which unites them. The country which has created enemies and dangers, needs to stimulate the courage of its children. To the most daring, to those who have enlarged frontiers, and gathered the spoils of war, are given honors, reputation, glory. Poets sing their exploits. Fair women weave garlands for them. And such is the power of public opinion that it separates the idea of injustice from spoliation, and even rids the despoiler of the consciousness of his wrong-doing.

The public opinion which reacts against military spoliation (as it exists among the conquered and not among the conquering), has very little influence. But it is not entirely powerless. It gains in strength as nations come together and understand one another. Thus, it can be seen that the study of languages and the free communications of peoples tend to bring about the supremacy of an opinion opposed to this sort of spoliation.

Unfortunately, it often happens that the nations adjacent to a plundering people are themselves spoilers when opportunity offers, and hence imbued with the same prejudices.

Then there is only one remedy–time. It is necessary that nations learn by harsh experience the enormous disadvantage of despoiling each other.

—  Frédéric Bastiat, Economic Sophisms: Natural History of Spoliation, p. 127-128